E-loyalty factors and smart services

As mentioned above, trust and switching cost influence loyalty to smart services. On one hand, a government can guarantee the increase of trust via:

 Validating online information regularly.

 Applying high information security standards.

 Offering a better service level in comparison to the traditional channels.

On the other hand, Gao (2005) argued that customers can neglect their dissatisfaction due to the high switching cost. These factors are also linked to the application of smart services in the UAE Thus the government needs to take advantage of the link between the switching cost and loyalty in order to increase smart services loyalty via:

 Offering online discounts.

 Offering quicker service at the same cost.

 Offering more valuable services exclusively to online users.

 Using technology to communicate with users, prior and after the use of the service, in form of reminders and service evaluation.

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2.2.3 E-LOYALTY CREATION

It is essential to understand the e-loyalty creation process and the different strategies available to businesses in order to use in their loyalty development. According to Gao (2005), companies tend to follow different strategies in order to establish and maintain a good level of e-loyalty, and the strategies applicable to e-loyalty are dissimilar to traditional approaches. Mann et al.

(2013) argued that two of the most used and influential strategies are the pull and push loyalty enhancement approaches.

2.2.3.1 PUSH

The push approach involves high risk in loyalty but reasonably good revenue generation for the company, as it includes continuous pushing to the clients. The push approach is positive in terms of revenue, but gives less attention to loyalty. Accordingly, customers will consider switching providers to a large extent easily, if they have been offered a better service or value elsewhere, or they if they have been exposed to a competitor using a similar push strategy.

Therefore, companies overcome low loyalty by increasing the switching cost. However, businesses might end up with many but unsatisfied clients or with less attention to satisfaction from the company in general.

2.2.3.2 PULL

A contradictory approach to the push strategy is the pull strategy which focuses on loyalty building as well as revenue, rather than only intensifying the switching cost. Once the pull strategy is implemented, companies are most likely to keep their clients for a longer time gaining a higher satisfaction rate in comparison to the push approach, since unsatisfied users can easily move elsewhere if needed with no restriction or expensive costs. As a result, governments with long-term strategies and a customer service focus are likely to follow the pull approach in order to gain revenue, as well as keep satisfied users.

The above are very important factors regarding the smart services in the UAE.

2.2.4 ONLINE LOYALTY LADDER

The online loyalty ladder is the detailed explanation of the different stages of the customer relationship improvement that the customers follow while using online services in order to establish a bond with a provider.

Brink and Berndt (2008) emphasized that the ladder steps are substantial to understand how loyalty is developed. According to Brink and Berndt (2008), the loyalty ladder consists of six

20 different phases, illustrated in Figure 2-4, and within every part, the user shows certain behaviour:

 Prospect: Identification phase, which includes the process of identifying the current consumers, whom are dealing with the business, but are not regular customers yet.

 Purchaser: All the customers that are characterized by being already a first time buyer.

Namely, they have decided and made their first use of the service, but yet for some reasons have not decided to repeat the transaction in the future.

 Client: Happens when a first time user decides to repeat the business relation with the same provider, but still hasn’t decided to be loyal. Accordingly, the client is moving towards a developing loyalty phase but still not a high contributor to business goals.

 Supporters: It includes all customers that are happy with the services, and make repeated transactions, but still not involved in the outside business promotion. In other words, clients that like a certain organisation and/or channel of services, but don’t make an effort to promote it.

 Advocate: Includes clients that are most likely to promote the use of the provider services to peers, since they extremely believe in the provider superiority in comparison to competition within the concerned market.

 Partner: Clients that strongly bond to the organisation through one of the relationship tools defined by either the organisation or the market. Within this phase, the user is a strong contributor to the business strategic goals.

FIGURE 2-4 LOYALTY LADDER PHASES 1- Prospect

2-Purchaser

3- Client

4-Supporters 5- Advocate

6- Partner

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2.3 SMART SERVICES AND E -COMMERCE

Smart services applications and websites are available to the public in exchange for a fee usually offered by regular channels. Accordingly, a commerce transaction is involved. In reality, electronic commerce has significant impact on the performance of economy, since it is considered prosperous in comparison to any offline trade, as it includes millions of daily transactions of customers, businesses, and organizations from different locations around the globe (Botha et al., 2008).

Nonetheless, according to Turban and King. (2012) traditional trade is organized by many written and unwritten rules and policies that systematize the flow of the business operations.

Since the Internet is a place where many trade activities initiate, thus policies and regulations are needed, as well as business models to categorize and organize the operations between the different interested parties.

Internet includes trade of goods and also services to customers, and sometimes to business entities, which is represented by the term B-to-C. However, a transaction between entities as a part of the production cycle of services is described as B-to-B e-commerce activity (Miller 2012). Turban and King (2012) argued that a third format of trade is recognized as C-to-B.

More specifically, customers offer their own services to different users by using the business as only a medium. A good example of C-to-B is the eBay.com e-commerce website, where clients sell their products all over the world via the website, representing a business selling users products and services rather than its own business goods to end users.

In addition, Turban and King (2012) mentioned that another form of e-commerce is known as B2B2C. In this format, two different businesses are involved in the transaction to sell to one final user. Furthermore, smart services could be a good example, since governments can hire companies to handle part of the online processes, which will result in two businesses working together to deliver the service to the end user.

Finally, it is also possible to deliver the service in form of B2C only, which shall eliminate any intermediary businesses, and will assure direct relation with clients. However, it all depends on the government’s strategy, and the available infrastructure.

2.3.1

E-COMMERCE FACTORS

There are many formats that boost e-commerce and shape it. According to Schneider (2009) only three formats are recognized as the essential factors that put together the e-commerce business model, and contribute the most to its activities. These are summarized in Figure 2-6 and namely are:

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 Business to Business

 Business to Consumer

 Business process support

The graph below clarifies the sizes and relations between the different formats according to Schneider (2009). Furthermore, it confirms that business-to-business transactions are much greater than business to consumers.

In spite of this, still the third format that includes business support activities is larger in volume than all the other combined transactions of business to business, and business to consumers.

2.3.2

E-COMMERCE FORMATS AND BUSINESS MODELS

In the traditional market place, commerce can take different formats. Similarly, e-commerce exists in different formats, and even within single services such as the smart services, e-commerce can exist in different formats, since it depends on the involved parties delivering the service to the final user.

2.3.2.1 CONSUMER-TO-CONSUMER

According to Turban and King (2012), consumer to consumer refers to any transaction that happens and results in someone gaining ownership of item or service, and the second one gaining ownership or acquiring the offered item or service. However, the business portal involved in this trade format is only an organizing party, and the revenue is generated in form of a commission collected from usually all involved parties. The C2C concept initiated as a result to the sizeable numbers of online buyers and sellers. Accordingly, a need for a well-organized platform arises.

Business-to-Business electronic commerce

Business to consumer electronic commerce Business processes that support selling and purchasing activities

FIGURE 2-5 ELEMENTS OF ELECTRONIC COMMERCE

23 Therefore, dedicated business websites were established to gather different parties all in one website. This was feasible by providing to the organization services, protection and facilitating the communications between consumers.

Moreover, Turban and King (2012) argued that some challenges exist within this concept namely online payment security trust initiation between consumers themselves and trust towards the online portal. As a result to these challenges, third parties were initiated in order to solve them, for example the payment insurance company PayPal.

2.3.2.2 CONSUMER-TO-CONSUMER APPLICATIONS

The C2C concept was initiated as a result to the sizeable numbers of online buyers and sellers.

Accordingly, a need for a well-organized platform rose. However, the business portal involved in this trade format was only an organizing party, and the revenue was generated in form of a commission collected usually from all involved parties. Therefore, as mentioned above, dedicated business websites were established to gather all different parties in one website by providing security and ease.

On the other hand, Turban and King (2012) emphasised that the available applications are many and the most important formats are the following:

C2C auctions: This is an auction, where an item is offered for sale, and users bid different prices to acquire the item. The role of the third party is to manage the auction where consumers can actively participate from all over the world.

Ads: In the case of ads, users offer an item and others browse the different available items for sale via the organizing portal expressing an interest when applicable. The ads can take different formats such as text advertisement, video advertisement and image advertisements.

2.3.2.3 CONSUMER TO CONSUMER MODEL

Trade connections are made from customer to customer representing the provider and the buyer. However, there is information involved in the operation in the form of data exchange between the different interested parties. According to Canzer (2006), this information is stored in big databases or might be transferred only without being saved through a central computer which is known as a server, rather than saved on the business data centres. Nevertheless, the business servers allow shortest information admission from involved consumers to the already stored data in the central computers. This occurs when the concerned parties disclose acceptance to trade in information files in order to finalise business transactions.

On the other hand, Canzer (2006) argued that consumer to consumer trade is not only about the exchange of media files, but also includes the exchange of tangible goods via online means, as well as the intangible exchange in form of data sharing practice. A good example of this role is

24 eBay that exclusively manages and has power over any risks. E-bay operates as an online auction hall to provide various services to users, either if they are offerings products or visiting the portal to purchase items.

2.3.2.4 BUSINESS-TO-CONSUMER

Manzoor (2010) argued that the business to consumer concept refers to any transaction that involves business as a providing party, represented by websites, and the consumers. Naturally, the provider offers services to consumers through the Internet, and charges them if they decide to proceed. However, the reputation of the business services, transferred within the online social networks, affects this format.

2.3.2.5 BUSINESS TO CONSUMER MODEL

According to Canzer (2006), online business success is linked to consumer behaviour, and consequently the business success depends on how the company understands the online behaviour of users, and how quickly it is able to adapt to behaviour transform.

Nevertheless, behaviour understanding is not the only factor impacting the success of online businesses. Further factors are the following:

 Pricing strategies

 Marketing innovation

 Quality control

 Market adaptability

On the other hand, O'Connor et al. (2004) emphasized that businesses can understand online behaviour and establish strategies, by answering various questions such as:

 Why consumers use a certain website?

 Would customers buy online, or just check prices?

 Which websites are regularly used?

Nonetheless, all is dependent on the understanding of online behaviour. This meaning that the more businesses invest and familiarise themselves with this understanding the more successful they will be.

2.3.2.6 BUSINESS TO CONSUMER RELATIONSHIP

Canzer (2006) emphasized that building a sustainable relationship is expensive, and companies are fully aware regarding the involved costs. In spite of this, they are still willing to invest more money and effort, since the expected profit generated from a loyal existing customer shall pay off the incurred preliminary costs to establish the good relationship with clients.

On the other hand, to build a sustainable business relationship is not easy, since the Internet as a market place increases the challenges, taking into consideration the global competition in the

25 same industry, and the enormous market size. In previous years, companies used to enhance relationships and keep customers for longer through traditional systems such:

 Club cards membership

 Point’s schemes

 User discounts

 Additional free services

Internet by nature is a borderless market place. Chaffey et al. (2012) argued that all providers are instantly competing to reach the same client in different and innovative ways, as well as the fact that consumers have access to immediate different providers. All that increased the challenges for companies.

However, the Internet offers many advantages and customer relationship possibilities for improvement, which shall result in loyal customers, once implemented wisely and timely.

Nevertheless, the development in available applications and technologies offers suitable replacement to the traditional loyalty channels, and also offers’ unique techniques to present customized products and services to match the end users behaviour and needs, as well as enhancers for business to customer communication (Smith & Kidd, 2000). These are important elements to take into consideration for the understanding of smart services in the UAE context.

2.3.3 SMART SERVICES AND ONLINE EXTRAS

Bargain power offers sovereignty to every party in the online transaction while trading with the second party. It impacts the decision and negotiation possibilities when an online decision is needed. Bargain power values vary depending on the business nature. According to Coteanu (2005), the authority in business-to-business transactions is quite balanced between the two parties, since the two different entities show similar interest to finalize the transaction. While in the business to consumer model, the bargain power held by the business is much larger than the consumer’s, since the consumer is in need to acquire a certain service. Consequently, the user is likely to search for protection to compensate the shortage in bargain power while trading with businesses online. As a result, the consumer realizes that the power of the provider is greater, and the consumer is weaker in B2C trade. Additionally the smart service users will face the same challenge, hesitating to use the new services if government power is more.

Wellington (2010) argued that extras are the added services that are offered in addition to the basic services the clients are searching for at no extra fee. For instance, a user wants to book a hotel room through an online website, observing that certain websites can offer extra services such as:

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 Early check in

 Late check out

 24/7 customer support

 Free cancellation

 Credit card payments

However, the available extras vary from a provider to another. According to Turban and King (2012) the added services are considered as an area of competition to attract and keep customers. On the other hand, it is noticed that in some industries, most of the providers are offering by default some inclusive extras with the basic service. For instance, most of the airline websites offer to travellers the option to choose their seats, while the core service here is flying from an origin city to a destination city, rather than choosing the seat.

Consequently, the smart services offered by the government can include a variety of added services to attract clients. And customers can benefit by getting extra services online at no extra cost, when using the available smart services applications:

 Less processing time for the same order if requested online.

 Free delivery to the user house or place of work upon completion

 Free document collection, in case extra documents are needed by the authority to finish the request.

 Post-paid orders, upon receiving the requested document.

2.3.4 E-MARKETING

Smart services are offered to potential users and are provided by the government. Consequently, it needs a marketing strategy in order to attract users and achieve the long-term government goals.

Dann and Dann (2011) argued that e-marketing as a concept involves all the marketing activities performed by online businesses and communication by different available tools to various business users. Nevertheless, it has been highlighted that e-marketing impacts all different formats of online trade such:

 B2B: Business to Business

 B2C: Business to Customer

 C2C: Customer to Customer

 B2B2C: Business to Business to Customer

27 Furthermore, Dann and Dann (2011) highlighted that e-marketing is also comparable to other concepts not only dealing with the ordinary business issues, but also sharing the same online nature such as:

 Marketing over IP

 Interactive marketing

 Mobile marketing

2.3.4.1 E-MARKETING DEFINITION

Researchers defined e-marketing differently. Gay et al. (2007) stated that e-marketing has been identified by the Institute of Direct Marketing as “The use of Internet and related digital information and communications technologies to achieve marketing objectivise” (p. 5). Thus confirming that the government needs to set a marketing strategy and apply it using available online means.

2.3.4.2 E-MARKETING ELEMENTS

The implementation of e-marketing strategies, in order to promote smart services and attract users, drives to the understanding of the e-marketing elements that influence the activities leading to the strategic goals of the government. These are important factors for the understanding of smart services in the UAE.

Rana (2009) explained that e-marketing includes many elements that have direct and indirect influence on the predefined businesses marketing strategies, as well as the marketing performance. Nevertheless, three main areas (illustrated in Figure 2-5) are relatively significant, and in general characterise e-marketing core functionality:

 Segmentation: This characteristic includes efficient use of marketing strategies to generate better client’s segmentation.

 Promotion: This element includes the methodology of using all different available channels to achieve enhanced service promotion, and pricing strategies

 Satisfaction: This characteristic refers to the linkage between strategic organizational goals and customer satisfaction level.

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2.4 BEHAVIOUR CHANGE THE ORIES

2.4.1 INNOVATION DIFFUSION THEORY (IDT)

The Innovation Diffusion Theory (IDT) is a theoretical model outlining acceptance patterns.

Research in many fields such as education, sociology, marketing, computer science, and

Research in many fields such as education, sociology, marketing, computer science, and

In document Management and design of persuasive smart services: the case of United Arab Emirates. (Page 34-200)